This Article has been authored by Suman Kumar Jha (Founder & Managing Partner), Afnaan Siddiqui (Co-Founder & Partner) & Visakha Raghuram (Associate) and Gurpreet Kaur
Introduction
The present appeal arises from an order dated 22.04.2024 (“Impugned Order”) passed by the National Company Law Tribunal (“Tribunal”), Chandigarh Bench, in relation to C.A. No. 197/2023 filed under sections 230-232 read with section 234 of the Companies Act, 2013 (“Act”). The appeal is brought by the Transferee Company in the Scheme of Amalgamation, seeking redressal against the Impugned Order.
Issue and Analysis
The appeal before the Hon’ble National Company Law Appellate Tribunal (“Appellate Tribunal”) concerns the dismissal of a Company Application (“CA”) seeking modification of the Scheme of Amalgamation. The modification primarily involved a minor adjustment in the share exchange ratio of the Transferor Companies. The NCLT rejected the CA and directed the Appellant Company/Transferee Company to initiate a fresh first motion application, which was contested on grounds of procedural fairness and efficiency.
After the initial approval of the Scheme by the Board of Directors of the amalgamating companies, there was a minor alteration in the share capital of the Transferor Companies due to the issuance of additional ordinary shares to existing shareholders. This resulted in a negligible adjustment to the swap ratio.
The Scheme of Amalgamation had originally received approvals from the respective boards of directors and shareholders of both the Appellant Company/Transferee Company and the Transferor Companies/Respondent Company. The subsequent minor modification in the share exchange ratio was supported by consent affidavits and regulatory compliances.
The Appellate Tribunal reviewed the Impugned Order considering established legal principles and statutory provisions under the Companies Act, 2013. It emphasized that the modification sought was a marginal adjustment in the share exchange ratio, which, according to legal norms and precedents, did not warrant restarting the entire approval process.
The Appellate Tribunal highlighted the discretion of the NCLT under Section 231 of the Companies Act, 2013 to approve modifications to schemes deemed necessary for proper implementation. It cited precedents where similar amendments, albeit more significant, had been sanctioned, demonstrating a consistent approach to adapting schemes without compromising fairness or compliance.
Criticizing the delay in concluding the proceedings before the NCLT, spanning nearly six months from the filing of the CA, the Appellate Tribunal argued that such delays could prejudice the interests of stakeholders. It stressed the need for expeditious resolution of corporate restructuring matters.
Conclusion
In conclusion, the Appellate Tribunal set aside the Impugned Order, granting the appeal with the prayers sought by the Appellant/Transferee Company. It instructed the NCLT to consider the modifications to the Scheme of Amalgamation as proposed, emphasizing procedural efficiency and adherence to legal standards in corporate restructuring. The decision underscores principles of judicial review and statutory interpretation in corporate amalgamation matters, ensuring that the NCLT exercises its discretion judiciously in approving modifications to schemes while upholding fairness, transparency, and statutory compliance under the Companies Act, 2013.